CGST Act 2017 Section 28
Detailed guide on Central Goods and Services Tax Act, 2017 Section 28 covering transfer of input tax credit rules.
The Central Goods and Services Tax Act, 2017 is a comprehensive legislation that governs the levy and collection of goods and services tax in India. It provides detailed provisions for various aspects of GST, including registration, input tax credit, returns, and assessment. Section 28 of the Act specifically addresses the transfer of input tax credit in cases of change in constitution of a registered person.
Understanding Section 28 of the CGST Act is crucial for taxpayers, businesses, professionals, and GST officers. This section deals with the procedural and substantive rules for transferring input tax credit when a registered person undergoes changes such as sale, merger, demerger, amalgamation, lease, or transfer of business. Proper compliance ensures seamless credit flow and avoids disputes or penalties.
Central Goods and Services Tax Act, 2017 Section 28 – Exact Provision
Section 28 of the CGST Act allows the transfer of input tax credit (ITC) in specific situations where the constitution of a registered person changes. This ensures that the new entity or person continuing the business can utilize the accumulated ITC without losing it. The transfer is subject to prescribed conditions and restrictions to prevent misuse or fraudulent claims. This provision supports business continuity and compliance under GST.
ITC transfer allowed on change in business constitution.
Applies to sale, merger, demerger, amalgamation, lease, or transfer.
Subject to prescribed conditions and restrictions.
Ensures continuity of input tax credit benefits.
Prevents loss of credit due to business restructuring.
Explanation of CGST Act Section 28
This section states that input tax credit can be transferred when a registered person’s business constitution changes. It applies to registered persons undergoing sale, merger, demerger, amalgamation, lease, or transfer of business.
Section allows transfer of ITC to the new entity or transferee.
Applies to registered persons under GST law.
Conditions and restrictions prescribed by rules must be followed.
Triggers include change in ownership or business structure.
Transfer helps maintain credit continuity and compliance.
Purpose and Rationale of CGST Act Section 28
The main purpose of Section 28 is to facilitate smooth transfer of input tax credit during business restructuring. It prevents credit loss and supports seamless GST compliance.
Ensures uniform indirect taxation during business changes.
Prevents tax evasion by regulating credit transfer.
Streamlines compliance for businesses undergoing restructuring.
Promotes uninterrupted flow of input tax credit.
Supports government revenue collection by avoiding disputes.
When CGST Act Section 28 Applies
This section applies when a registered person undergoes a change in business constitution involving transfer or restructuring.
Applicable for goods and services supply businesses.
Relevant at the time of business sale, merger, or lease.
Focuses on intra-state and inter-state registered persons.
Triggered by change in ownership or legal entity.
Excludes cases without change in constitution or ownership.
Tax Treatment and Legal Effect under CGST Act Section 28
Under Section 28, the input tax credit accumulated by the transferor can be transferred to the transferee. This transfer is subject to compliance with rules and conditions prescribed by the government. The transferee can then utilize the ITC for payment of GST on future supplies. This provision ensures that tax liability computation reflects the transferred credit and avoids double taxation or credit loss.
ITC is credited to the transferee’s electronic credit ledger.
Transfer must comply with prescribed procedural rules.
Prevents denial of credit due to business restructuring.
Nature of Obligation or Benefit under CGST Act Section 28
Section 28 creates a benefit for registered persons by allowing transfer of input tax credit. It imposes a compliance obligation to follow prescribed conditions for transfer.
Creates a conditional benefit of ITC transfer.
Mandatory compliance with procedural rules.
Benefits transferee by preserving credit continuity.
Obliges transferor to furnish necessary documentation.
Ensures transparency and accountability in credit transfer.
Stage of GST Process Where Section Applies
Section 28 applies primarily at the stage of business restructuring and transfer of credit. It impacts invoicing, return filing, and credit ledger adjustments.
Triggered at supply or transfer of business stage.
Invoicing may reflect transfer details.
Return filing must disclose credit transfer.
Payment of tax utilizes transferred ITC.
Assessment and audit may verify compliance.
Penalties, Interest, or Consequences under CGST Act Section 28
Non-compliance with Section 28’s conditions can lead to denial of ITC transfer, interest on unpaid tax, and penalties. Fraudulent transfer attempts may attract prosecution.
Interest liability on disallowed credit amounts.
Penalties for incorrect or false declarations.
Prosecution for fraudulent credit transfer.
Denial or reversal of ITC transfer.
Possible audit scrutiny and recovery proceedings.
Example of CGST Act Section 28 in Practical Use
Company X, a registered GST taxpayer, merges with Company Y. Both have accumulated input tax credit. Under Section 28, Company X transfers its ITC balance to Company Y following prescribed rules. Company Y uses the transferred credit to offset GST on future supplies, ensuring no credit loss during merger.
Ensures smooth credit transfer during mergers.
Prevents disruption in GST compliance.
Historical Background of CGST Act Section 28
GST was introduced in India in 2017 to unify indirect taxes. Section 28 was designed to address credit transfer issues during business restructuring. Over time, GST Council decisions have refined procedural rules for credit transfer.
Introduced as part of GST implementation in 2017.
Intended to protect ITC rights during business changes.
Amended through GST Council notifications for clarity.
Modern Relevance of CGST Act Section 28
In 2026, Section 28 remains vital for digital GST compliance. With e-invoicing and GSTN systems, credit transfer is streamlined. Businesses restructuring must comply digitally to avoid disputes and penalties.
Supports digital compliance via GSTN portal.
Ensures policy relevance in evolving GST framework.
Facilitates practical credit transfer in business changes.
Related Sections
CGST Act, 2017 Section 7 – Scope of supply.
CGST Act, 2017 Section 9 – Levy and collection of tax.
CGST Act, 2017 Section 16 – Eligibility for input tax credit.
CGST Act, 2017 Section 31 – Tax invoice.
CGST Act, 2017 Section 39 – Furnishing of returns.
CGST Act, 2017 Section 73 – Demand for non-fraud cases.
Case References under CGST Act Section 28
No landmark case directly interprets this section as of 2026.
Key Facts Summary for CGST Act Section 28
Section: 28
Title: Transfer of Input Tax Credit
Category: Input Tax Credit, Procedure
Applies To: Registered persons undergoing change in business constitution
Tax Impact: Transfer of accumulated ITC to transferee
Compliance Requirement: Follow prescribed conditions and documentation
Related Forms/Returns: GST ITC transfer forms, GST returns
Conclusion on CGST Act Section 28
Section 28 of the CGST Act, 2017 plays a crucial role in safeguarding the input tax credit rights of businesses undergoing changes in their constitution. By allowing the transfer of ITC, it ensures that credit accumulated by the transferor is not lost, promoting business continuity and compliance.
Taxpayers and GST officers must understand and comply with the conditions prescribed under this section to avoid penalties and ensure smooth credit flow. In the evolving GST landscape, Section 28 remains a vital provision supporting seamless tax administration and revenue collection.
FAQs on CGST Act Section 28
What types of business changes allow transfer of input tax credit under Section 28?
Section 28 permits ITC transfer during sale, merger, demerger, amalgamation, lease, or transfer of business. These changes must involve a registered person under GST.
Is the input tax credit transfer automatic under Section 28?
No, the transfer is subject to conditions and restrictions prescribed by GST rules. Proper documentation and compliance are required.
Who benefits from the ITC transfer under this section?
The transferee or new registered person benefits by receiving the accumulated input tax credit from the transferor.
What happens if the transferor does not comply with Section 28 requirements?
Non-compliance can lead to denial of ITC transfer, interest, penalties, and possible prosecution for fraudulent claims.
Does Section 28 apply to unregistered persons?
No, Section 28 applies only to registered persons under the CGST Act undergoing change in constitution.
